Investing Strategies

February 2020

“Shippergeddon” Could Produce Big Gains Down the Road

February 11, 2020TradeSmith Research Team

Deep-value investors should take note of what’s happening in the global shipping industry. The outlook for shippers is so bad right now, you could call it “shippergeddon.” Conditions are full-on catastrophic, due to a triple-whammy of negative impacts. It isn’t time to act, but it’s time to keep an eye out. A horrible outlook for shippers now could produce significant opportunity later, when shipping stocks rise again, like Lazarus from the dead. Some of the biggest investment gains come from

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Inflation Could Come Back Suddenly and Powerfully — Here’s How

February 10, 2020TradeSmith Research Team

Ken Griffin is worried about inflation. We are, too. The market is highly complacent in its low-inflation assumptions. Many assets are priced as if inflation will stay low for years or even decades. If inflation roars back suddenly, it could wreak havoc in treasury bonds, high-yield debt, overbought “safe havens” like consumer staples and utilities, and multiple other places. It could even trigger a new global crisis. We aren’t there yet, but there is a way to get there quickly

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The World is Drowning in Debt, and Nobody Knows What Will Happens Next

February 6, 2020TradeSmith Research Team

The world is drowning in debt, and nobody knows what will happen next. This is terrible news for fiat currencies, and excellent news for gold and Bitcoin. At a certain point, debt tends to beget more debt in a downward spiral with no way out. This generally happens for two reasons: First, because the debt load gets so heavy, relative to income, that the borrower is forced to borrow more just to stay afloat, which only makes the debt load

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December 2019

Best of: Most Stocks are Duds (But You Can Win Anyway)

December 24, 2019TradeSmith Research Team

Editor’s note: We come across a lot of research, and the study performed by Hendrik Bessembinder earlier this year was one of the most eye-opening we’ve seen. If you have a poorly performing stock in your portfolio, hoping it might make a comeback, here is some bad news: That comeback isn’t likely. Most “dud” stocks tend to stay duds. Not only that, it turns out well over half of all stocks lose money — even during bull markets, and even

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The Man Who Always Says “No”

December 2, 2019TradeSmith Research Team

Imagine having a man who works for you whose only job is to say “No” to things. There is nothing else this man would do for you. He wouldn’t answer your phone, or help you with spreadsheets, or offer you assistance of any kind. If you asked for the slightest bit of help outside his job description he would just say “no” again — the only thing he was good at. Meanwhile, when he wasn’t saying “no” to something, he

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November 2019

Conventional Investment Advice is Like Dieting Advice (All Over the Map and Terrible)

November 13, 2019TradeSmith Research Team

There are few things more obnoxious than dieting and nutrition advice. The more you dig for answers, the more confusing things get. The findings conflict with each other. The recommendations are all over the map. For example, one guy, a doctor or a Ph.D., tells you whole wheat grains are a bedrock staple. Another Ph.D. says grains are toxic for some impressive-sounding reason — because the casing of the wheat kernel was designed to be hard to digest and pass

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Buffett’s Silence Speaks Volumes as He Sits on a Mountain of Cash

November 8, 2019TradeSmith Research Team

When it comes to sky-high market valuations, Warren Buffett doesn’t have to speak. His mountain of cash does all the talking. “Sky-high” was the exact phrase Buffett used to describe market prices earlier this year. In spite of hoping to make an “elephant-sized acquisition” — another Buffett phrase — Berkshire’s Hathaway’s cash pile has swelled to a record-busting $128 billion. In its most recent quarter, Berkshire also booked its highest ever operating profit, at $7.86 billion. That means more cash

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How Cycles and Position Sizing are Connected

November 6, 2019TradeSmith Research Team

We’ve been talking about cycles for the past few weeks. You can get a refresher here: What Investors and Farmers Have in Common: The Enduring Power of Cycles The Lotka-Volterra Equations: Nature’s Ode to Boom and Bust The WeWork Implosion is a Spectacular Example of a Cycle Top (and Era’s End) Today, we’ll explain how cycles and position sizing are connected. And we’ll do so with the help of a legendary billionaire, Howard Marks. Howard Marks is a distressed-debt investor

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Big Tech is a Hot Mess, But Microsoft Floats Above the Fray

November 1, 2019TradeSmith Research Team

The world of big tech looks like a chaotic, bruising, conflicted hot mess right now. And then there is Microsoft, floating above the fray. The Redmond, Wash.-based giant not only vies closely with Apple for the title of “most valuable company in the world” — both of them have a trillion-plus in market cap — it seemingly skates through a hostile political environment with no drama. All the other tech giants have headaches or something worse. Amazon, for example, is

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October 2019

The WeWork Implosion is a Spectacular Example of a Cycle Top (and Era’s End)

October 30, 2019TradeSmith Research Team

WeWork was, at one time, a Silicon Valley “unicorn” of legendary status. Now it is unicorn roadkill. In August, we argued that “The WeWork IPO Sums Up Everything Bad About the Unicorn Bubble.” That was more or less on point apart from one thing: The IPO never actually happened. Instead, WeWork self-destructed in one of the most bizarre and spectacular implosions of any company in Silicon Valley history. It wasn’t just that the WeWork IPO got called off. It was

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Buying Puts on Transport Stocks as a Protective Hedge

October 25, 2019TradeSmith Research Team

The U.S. stock market is in an uncertain place right now. The Dow and S&P 500 are not far from their all-time highs, but technology stocks are a mixed bag and small caps are well off their highs. Then, too, economic indicators are also a mixed bag. Some point toward optimism, but others are more gloomy, or even ominous. And there is no shortage of political and geopolitical drama: Brexit, trade war, Middle East saber rattling, impeachment fights, on and

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The Lotka-Volterra Equations: Nature’s Ode to Boom and Bust

October 23, 2019TradeSmith Research Team

Why should investors pay attention to cycles? For the same reason farmers pay attention to seasons. To maximize the harvest, a farmer has to know the given season — and the seasons are a four-part cycle that repeats year after year. It would make no sense for the farmer to try and harvest crops in the spring (or plant them in the fall). Investors, too, have actions that apply to given cycle points. But investment cycles are shaped by human

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